Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 20 - 21
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan Returns up to 1 year are on To provide liquidity with returns commensurate with low risk through a portfolio of money market and debt securities. However, there can be no assurance that the investment objective of the scheme will be achieved. Indiabulls Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 6 Jan 12. It is a fund with Moderately Low risk and has given a Below is the key information for Indiabulls Ultra Short Term Fund Returns up to 1 year are on Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Aditya Birla Sun Life Savings Fund Growth ₹397.746
↑ 0.22 ₹16,489 0.4 1.5 3.2 7.6 7.6 8.1 Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹27.5296
↑ 0.02 ₹15,040 0.8 -2.1 0.2 4.6 7.3 8.2 Indiabulls Ultra Short Term Fund Growth ₹1,941.84
↑ 1.10 ₹256 0.8 1.7 3.2 6.9 7.1 7.7 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 3 Apr 20 1. Aditya Birla Sun Life Savings Fund
CAGR/Annualized return of 7.8% since its launch. Ranked 6 in Ultrashort Bond category. Return for 2019 was 8.5% , 2018 was 7.6% and 2017 was 7.2% . Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (03 Apr 20) ₹397.746 ↑ 0.22 (0.06 %) Net Assets (Cr) ₹16,489 on 29 Feb 20 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.35 Sharpe Ratio 9.54 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.5% Effective Maturity 6 Months 18 Days Modified Duration 5 Months 19 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 15 ₹10,000 31 Mar 16 ₹10,884 31 Mar 17 ₹11,843 31 Mar 18 ₹12,700 31 Mar 19 ₹13,713 31 Mar 20 ₹14,774 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 3 Apr 20 Duration Returns 1 Month 0.4% 3 Month 1.5% 6 Month 3.2% 1 Year 7.6% 3 Year 7.6% 5 Year 8.1% 10 Year 15 Year Since launch 7.8% Historical performance (Yearly) on absolute basis
Year Returns 2019 8.5% 2018 7.6% 2017 7.2% 2016 9.2% 2015 8.9% 2014 9.7% 2013 9.5% 2012 9.7% 2011 9.2% 2010 5.8% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 11 Oct 14 5.23 Yr. Kaustubh Gupta 15 Jul 11 8.47 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 29 Feb 20
Asset Allocation
Asset Class Value Cash 42.08% Debt 57.92% Debt Sector Allocation
Sector Value Corporate 56.49% Cash Equivalent 26.48% Government 16.79% Securitized 0.24% Credit Quality
Rating Value AA 12.57% AAA 87.43% Top Securities Holdings / Portfolio
Name Holding Value Quantity Power Finance Corporation Ltd.
Debentures | -4% ₹724 Cr 7,200
↑ 2,550 National Bank For Agriculture And Rural Development
Commercial Paper | -4% ₹683 Cr 14,000
↑ 14,000 Reliance Industries Limited
Debentures | -3% ₹542 Cr 5,400
↑ 4,250 Reliance Jio Infocomm Limited
Commercial Paper | -3% ₹492 Cr 10,000
↑ 10,000 Reliance Retail Limited
Commercial Paper | -3% ₹425 Cr 8,500 6.25% Indusind Bank Limited (26/03/2020)
Net Current Assets | -2% ₹400 Cr The Tata Power Company Limited
Commercial Paper | -2% ₹393 Cr 8,000 Shriram Transport Finance Company Limited
Debentures | -2% ₹349 Cr 3,500
↑ 3,500 IndusInd Bank Limited
Certificate of Deposit | -2% ₹330 Cr 35,000
↑ 35,000 Rec Limited
Debentures | -2% ₹326 Cr 3,250 2. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 8.6% since its launch. Return for 2019 was 9.6% , 2018 was 8.7% and 2017 was 8.2% . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (03 Apr 20) ₹27.5296 ↑ 0.02 (0.09 %) Net Assets (Cr) ₹15,040 on 29 Feb 20 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 0.42 Sharpe Ratio 0.39 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 9.48% Effective Maturity 6 Months 25 Days Modified Duration 5 Months 23 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 15 ₹10,000 31 Mar 16 ₹10,963 31 Mar 17 ₹12,008 31 Mar 18 ₹12,972 31 Mar 19 ₹14,167 31 Mar 20 ₹14,834 Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 3 Apr 20 Duration Returns 1 Month 0.8% 3 Month -2.1% 6 Month 0.2% 1 Year 4.6% 3 Year 7.3% 5 Year 8.2% 10 Year 15 Year Since launch 8.6% Historical performance (Yearly) on absolute basis
Year Returns 2019 9.6% 2018 8.7% 2017 8.2% 2016 9.7% 2015 9.7% 2014 10% 2013 10% 2012 10.3% 2011 9.4% 2010 5.9% Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Santosh Kamath 25 Oct 18 1.18 Yr. Pallab Roy 1 Jun 08 11.59 Yr. Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 29 Feb 20
Asset Allocation
Asset Class Value Cash 23.54% Debt 76.46% Debt Sector Allocation
Sector Value Corporate 76.8% Cash Equivalent 22.2% Government 1% Credit Quality
Rating Value A 17.74% AA 69.2% AAA 13.06% Top Securities Holdings / Portfolio
Name Holding Value Quantity Vedanta Limited
Debentures | -5% ₹795 Cr 7,900 Call, Cash & Other Assets
Net Current Assets | -4% ₹638 Cr Bharti Airtel Limited
Debentures | -4% ₹553 Cr 5,500 JM FINANCIAL CREDIT SOLUTIONS LIMITED
Debentures | -4% ₹540 Cr 5,400 Indostar Capital Finance Limited
Debentures | -3% ₹439 Cr 4,400 Bharti Airtel Limited
Debentures | -3% ₹400 Cr 4,000 INDOSTAR CAPITAL FINANCE LIMITED
Debentures | -3% ₹390 Cr 3,900 NIRCHEM Cement Limited
Debentures | -3% ₹378 Cr 3,750 EDELWEISS COMMODITIES SERVICES LIMITED
Debentures | -2% ₹371 Cr 7,500 EDELWEISS COMMODITIES SERVICES LIMITED
Debentures | -2% ₹361 Cr 3,650 3. Indiabulls Ultra Short Term Fund
CAGR/Annualized return of 8.4% since its launch. Ranked 17 in Ultrashort Bond category. Return for 2019 was 7.6% , 2018 was 7.1% and 2017 was 6.9% . Indiabulls Ultra Short Term Fund
Growth Launch Date 6 Jan 12 NAV (03 Apr 20) ₹1,941.84 ↑ 1.10 (0.06 %) Net Assets (Cr) ₹256 on 29 Feb 20 Category Debt - Ultrashort Bond AMC Indiabulls Asset Management Company Ltd. Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.7 Sharpe Ratio 7.42 Information Ratio 0 Alpha Ratio 0 Min Investment 500 Min SIP Investment 500 Exit Load NIL Yield to Maturity 0% Effective Maturity Modified Duration Growth of 10,000 investment over the years.
Date Value 31 Mar 15 ₹10,000 31 Mar 16 ₹10,862 31 Mar 17 ₹11,782 31 Mar 18 ₹12,595 31 Mar 19 ₹13,540 31 Mar 20 ₹14,495 Returns for Indiabulls Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 3 Apr 20 Duration Returns 1 Month 0.8% 3 Month 1.7% 6 Month 3.2% 1 Year 6.9% 3 Year 7.1% 5 Year 7.7% 10 Year 15 Year Since launch 8.4% Historical performance (Yearly) on absolute basis
Year Returns 2019 7.6% 2018 7.1% 2017 6.9% 2016 8.8% 2015 8.8% 2014 9.3% 2013 8.8% 2012 2011 2010 Fund Manager information for Indiabulls Ultra Short Term Fund
Name Since Tenure Vikrant Mehta 20 Jun 19 0.53 Yr. Malay Shah 22 Aug 14 5.36 Yr. Sourabh Sharma 17 Jan 19 0.95 Yr. Data below for Indiabulls Ultra Short Term Fund as on 29 Feb 20
Asset Allocation
Asset Class Value Cash 92.42% Debt 7.58% Debt Sector Allocation
Sector Value Corporate 59.46% Cash Equivalent 35.99% Government 4.55% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity ICICI Bank Limited
Certificate of Deposit | -10% ₹25 Cr 2,500,000
↑ 2,500,000 BIRLA GROUP HOLDINGS PRIVATE LIMITED
Commercial Paper | -10% ₹25 Cr 2,500,000
↑ 2,500,000 IndusInd Bank Limited
Certificate of Deposit | -10% ₹25 Cr 2,500,000 Small Industries Development Bank Of India
Commercial Paper | -10% ₹24 Cr 2,500,000 HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
Commercial Paper | -8% ₹21 Cr 2,100,000 Andhra Bank
Certificate of Deposit | -7% ₹18 Cr 1,850,000 Export-Import Bank Of India
Commercial Paper | -7% ₹18 Cr 1,850,000 Axis Bank Limited
Certificate of Deposit | -7% ₹18 Cr 1,850,000 Aditya Birla Finance Limited
Commercial Paper | -6% ₹15 Cr 1,500,000
↑ 1,500,000 48 DCMB 23032020
Sovereign Bonds | -5% ₹14 Cr 1,400,000
↑ 1,400,000
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